Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Gilead's Sofosbuvir Gains FDA Approval, Attracts Patent Battle

Race for new hepatitis C therapy riddled with patent complications.

The end may have seemed to be in sight in the race for a new hepatitis C therapy, with Johnson & Johnson's (NYSE:JNJ) oral drug Olysio (simeprevir) recently acquiring approval and Gilead Sciences's (NASDAQ:GILD) sofosbuvir, to be marketed as Sovaldi, gaining approval from the Food and Drug Administration earlier this month.

While J&J's Olysio was the first therapy to acquire approval, it is a limited agent, effective only against a certain genotype of hepatitis C. Gilead's much broader-reaching sofosbuvir approval is a landmark one in developing an oral hepatitis C treatment. It is the first of interferon-free treatments, a cumbersome injection with unpleasant flu-like side effects.

However, Sovaldi will still be used as a combination, depending on the genotype of hepatitis C. Genotypes 1 and 4 will still require use with peg-interferon alfa and ribavirin, while treatment for genotype 2 and 3 will be truly interferon-free and require only Sovaldi in combination with ribavirin.

Rivals are certainly making moves to a piece of the pie with Idenix Pharmaceuticals(NASDAQ:IDIX) adding two lawsuits last week to an already existent patent battle surrounding sofosbuvir. In them, Idenix alleges that Gilead violates certain patents on its nucleotide prodrugs (precursors) and attacks a separate patent associated with Gilead's 2011 acquisition of Pharmasset, a buyout that got Gilead sofosbuvir in the first place.

This is not Idenix's first legal rodeo with Gilead, having made an effort in 2012 to lay claim to an entire class of compounds of metabolites that would include sofosbuvir. At the time, Idenix attempted to claim it was the initial inventor of sofosbuvir, but the ruling deferred the broad claims to the future specificity of likely patent filings.

The Pharmasset acquisition is the basis for another patent claim by Roche (NASDAQOTH:RHHBY), where the Swiss company alleges that its $168 million partnership with Pharmasset gave it exclusive rights to sofosbuvir since the prodrug developed during the 2004 deal was a precursor to sofosbuvir. Gilead answered that Roche's partnership terminated long before Gilead's $11 billion buyout.

Meanwhile, Merck (NYSE:MRK) made its own claims of patent infringement and a request for 10% of sofosbuvir's sales through royalties associated with sublicensing of two of Merck's hepatitis C patents, which Gilead responded to with a pre-emptive lawsuit.

The patent squabbles extend beyond just big pharma. Gilead is also fighting patent opposition in India, a major market for treatment of hepatitis C. Gilead's hefty price tag of $84,000 for one treatment course of sofosbuvir makes it likely too expensive for patients in developing countries, even at a discounted rate. Groups have since filed patent oppositions with India's Patent Office in an attempt to allow for generics to be produced at an affordable price for patients, and these have gained support in the area.

Bottom lineIt is no surprise so much of big pharma is clamoring to break into this market, either through R&D or legal battles. Sofosbuvir is almost certainly to be game-changer, and peak sales are estimated to be upwards of $7 billion. More than 184 million people are infected with hepatitis C according to the World Health Organization, and an oral, interferon-free therapy is the holy grail for the market.

Like most of big pharma, Gilead is no stranger to the complexity of partnerships, and so far it has shown that it is fighting patent claims aggressively to protect itself. The next steps for Gilead will be an all-oral, interferon-free combination for genotype 1 patients, with AbbVie and Bristol-Myers Squibb vying to develop the same. However, Gilead has an advantage with the surprise FDA labeling to "consider" an interferon-free combination of Sovaldi and ribavirin for genotype 1 patients who are interferon ineligible.

Fool contributor Amy Ho has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.